Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on March 16, 2014

I am 22. I intend to invest ₹5,000 every month in an RD for two years. Also, I want to make equity investments for seven years by parking ₹2,000 every month.

Shaifali Kanojia

You have done well to start investing early. But at 22, your risk appetite seems low. Investing ₹5,000 in a recurring deposit and ₹2,000 in equity schemes suggests that you seek more predictability and less volatility.

Also, you intend to invest in the RD for only two years. If there is a requirement of funds after such a time frame, safer debt avenues such as RDs are good.

Giving yourself seven years for equity investments is a good move as there would be greater scope for meaningful capital appreciation. If you do not require funds in two years’ time, increase the allocation to equity schemes. Try to invest ₹3,000 in the RD and the rest in equity schemes.

For the ₹2,000 you have earmarked for equity, park ₹1,000 each in ICICI Pru Focused Bluechip and UTI Opportunities. These funds are large-cap-oriented with proven track records. If you can save more or reduce the RD investment, split that sum equally among the above-mentioned schemes.

I am investing ₹2,000 a month each in HDFC Top 200, HDFC Growth and HDFC Mid-Cap Opportunities, through the SIP (systematic investment plan) route. The investment began in June 2011 and is to continue till May 2015. You have said in your columns that HDFC Mid-Cap Opportunities is a good scheme. What about the other two?

- PK Ramdas

You have invested in three schemes from the same fund house. Diversification in portfolio means not just investing in multiple schemes but also choosing different fund houses.HDFC Mid-Cap Opportunities has delivered exceptionally well over the past five years and has proven itself across market cycles. Continue investing in the scheme.

HDFC Growth has been underperforming over the past three years. It does have a long track record but it is not top-notch. Sell the units in the fund and start a SIP of ₹2,000 in Franklin India Flexi Cap, instead. This scheme has a proven track record of delivering above-average returns over the years.

HDFC Top 200 has an admirable long-term track record of over 15 years. But its performance has not been up to the mark in recent times. Retain the fund but stop further SIPs in the scheme.

Start SIPsin Birla Sun Life Frontline Equity, instead. This large-cap oriented fund has a proven track record and has acquitted itself well across market conditions.

You have started investments in 2011 and wish to continue till 2015. That makes it just four years. Ideally, you must invest for a period of 7-10 years systematically to derive meaningful inflation-beating returns.

I have been investing in HDFC Top 200 and HDFC Equity through SIP mode from January 2011. Even after three years, their appreciation is not encouraging. I am 54 and started these investments as an additional retirement fund to mature by 2020. Should I continue with these schemes or move to other funds?

- Gregory Mathew

Your observations on HDFC Top 200 and HDFC Equity are quite right. These two schemes have not done well compared with peers in their category, especially HDFC Top 200. Both the schemes have excellent long-term track records, but that may not be any consolation. There is considerable portfolio overlap as well between the two schemes, though HDFC Equity has significant mid-cap exposure in addition to large-cap stocks. This scheme is in recovery mode in recent times and has been able to deliver ahead of its category on a one-year returns basis. Retain this fund and continue investments in it. Discontinue investments in HDFC Top 200 as you already have another fund from the same house and also due to its relative underperformance.

Instead, opt for ICICI Pru Focused Bluechip Equity, a large-cap fund that has delivered quite well over the years. Since you are making these investments as an ‘additional’ retirement fund, it is assumed that you have set aside the bulk of your savings in safer debt avenues.

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Published on March 16, 2014

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